Reward SystemCommunist Iron Rice Bowl (1949-1978)- workers assigned to jobs; workers had fixed wages and no rewards for how hard they worked; guaranteed lifetime employment; gov’t provided housing and clothes

1978: rules changed to allow bonus systems and rewards for amount and difficulty of work done

1986: new regulation makes it possible to fire workers more incentive to work harder

Today: Iron Rice Bowl System dying out but still seen in many state-owned enterprises

Reward System China’s talent market paradox: companies in a country with more than 1.3 billion people suffer staff shortages

Compensation packages have risen sharply in China over the last few years to reduce risk of losing top performers

High inflation and demand for workers have driven up wages

Unions do not concern themselves with collective bargaining

Workers often belong to a unit, or work group, and their pay and benefits are governed by policies set for the unit

Reward SystemCompensation standards can vary significantly City? State-owned enterprise? Foreign invested enterprise? Expatriates?

E.g.: Accounting exec in Shanghai:Employee 1: Five years of accounting experience at a SOE: Salary: $6,000Employee 2: Same as above, but with experience at a FIE instead of an SOE: Salary: $12,000 - $24,000Employee 3: Same as above, but with fluent English:Salary: $50,000 - $60,000

Many companies send employees to China as expatriates, the cost of these expatriates sometimes equals 2,000% to 4,000% of the cost of a local counterpart.

Reward SystemPaid Annual Vacation Days

- Service of 1-10 years= 5 days leave- Service of 10-20 years= 10 days leave- Service of 20 years= 15 days leave

Workers may receive six months' sick leave at 60% to 100% of salary

Maternity leave at full pay is provided for up to 90 days.

Monthly pension premiums are 8% of each employee’s salary contributed by the employee, and at least 10% (varying by city) contributed by the employer. Monthly unemployment insurance premiums are 1% of salary from the employee and 2% from the employer.

Reward SystemIn retaining key employees, stock options have become much more common recently. Introduced in many private and even state-owned

companies.

Congratulations and condolence policies for long-service awards, employees’ marriages, employees’ birthdays, birth of children, and for

death of employees’ family members

Annual bonuses of app. one month's salary traditionally are paid at Chinese Lunar New Year.

Performance based bonuses have emerged and have been enthusiastically welcomed by younger professionals.

Reward System

Housing Boom Issue: Very expensive rental rates in cities •In many Chinese cities, employers are required by law to contribute at least5% of an employee's salary to government-managed housing contributionfunds.

• In practice, many FIEs issue direct housing allowances rather than contributing to the less efficient government fund.

•Some larger companies are even building their own housing units, which they sell or rent to their employees through regular payroll deductions.

Reward System

While there is upward pressure on the compensation and benefits for managerialpersonnel and professionals, the wages for unskilled Chinese workers have remained stagnant.

Abundant supply of migrants from inland China who have swarmed into citiessearching for jobs

Issue of Increasing Compensation Disparity

Chinese Migrant Workers

Reward System

China's first minimum wage law set in 2004 by the Ministry of Labour and Social Security.

Provinces, municipalities and autonomous regions allowed to legislate own min. wage separate from the national one.

Eg. Guangdong Province increased its minimum wage on 1 September 2006 and was split into five categories.

The highest is ¥ 4.66 (~US$ 0.68) an hour. The lowest is ¥ 2.69 (~US$ 0.39) an hour.

Reward System

Wages have increased in the last few years, but barely keep up with high rate of inflation

Minimum wages were raised in the last few years, but many enterprises do not pay minimum wage

A big problem is non-payment of wages considered the norm in some sectors. Often wages are not paid for months, and many do

not get the full sum.

Reward System•Factories in China often provide employees with meals and lodging.•Migrant workers, whose homes are too far away to commute, live in shared dorms•Largest factories- 200,000 worker residents

Worker Dormitory-Shenzen

Employees eating dinner at a Chinese toy factory